Thursday, January 15, 2009

Springfield economy is predicted to rebound in spring

The University of Illinois at Springfield announces that the greater Springfield Enterprise Index (SEI) for September 2008 is 126, which means expected above normal economic activity and an increase over one year ago.

While still above normal, there was a projected downturn in activity during November and December 2008. However, the economy is projected to return to current levels in the first part of 2009. By May of 2009, the level of activity is expected to have returned to levels like fall 2008.

The forecast for the economy in late summer and one year from now is stronger growth. The index for next September is forecasted to be at 131. The Springfield area economy has not seen this level of activity since early 2001.

“The SEI forecast of the Springfield economy for this quarter is consistent with last quarter’s forecast that also indicated the economy rebounding in early 2009,” said Dr. Patty Byrnes, professor of economics at the University of Illinois at Springfield. “This is also a similar pattern for the other metropolitan areas in the state.”

An index value of 100 indicates that the area economy is on its long-term growth trend. An SEI value greater than 100 indicates “above average” activity while values below 100 indicate “below average” activity.

What is the SEI?The SEI is a leading indicator of the local area status of the business cycle. This means that it helps predict the trend in the local economy. It can be used by business, workers government to understand profits, job prospects and tax revenues.

The SEI is interpreted by first remembering that overtime the Springfield area economy has grown, despite ups and downs of the level of economic activity. The index measures how far away the economy is from this and growth trend. The SEI is a leading indicator which means it measures changes in economic activity before the economy starts to follow a particular pattern or trend. The SEI, like other leading indicators, can be used to predict changes in the economy but are not always accurate. As the SEI is used over longer periods of time, we can evaluate how well it predicts changes in the economy.

The SEI measures the economy based on national and local factors. The national component is from the national business cycle using the Chicago Federal Reserve Bank National Activity Index (CFNAI), which is a composite of many indicator including output and income, employment and unemployment, consumption, housing starts and sales, manufacturing and trade sales, and inventories and orders.

The local business cycle component is represented by non-farm employment in four sectors, manufacturing, construction, retail, and other sectors (including government). The sectors are based on the local employment activities and Midwest manufacturing activities estimated from the Chicago Fed Midwest Manufacturing Index (CFMMI).

The index was developed and created by the Regional Economic Applications Laboratory, Institute of Government and Public Affairs, University of Illinois. The local interpretation and results are prepared by Patty Byrnes, Center for State Policy and Leadership at the University of Illinois at Springfield. Support is provided by The Greater Springfield Chamber of Commerce in arranging local focus groups for the SEI. Information on the Springfield area index can be obtained from Patty Byrnes at 217-206-7783 or pbyrn1@uis.edu.

The index is a partnership between the University of Illinois at Springfield, The Greater Springfield Chamber of Commerce and the University of Illinois, Institute of Government and Public Affairs.

For more information about the news release, contact Sarah Wolin, Director of Communications for the Chamber of Commerce at 525-1173.